Richard Green is a professor in the Sol Price School of Public Policy and the Marshall School of Business at the University of Southern California.
This blog will feature commentary on the current state of housing, commercial real estate, mortgage finance, and urban development around the world. It may also at times have ruminations about graduate business education.

Sunday, April 15, 2018

Rent stabilization is a transfer from those who own rent stabilized units to those who live in such units. As such, it is not a specific redistribution from high income households to low income households, but rather a random distribution from owners of various income levels (who can range from middle-class owners of one unit to large holders of private equity or REITS) to renters of various income levels.

I know of no good way to recover the incomes of property owners, but we can get a flavor of the distribution of income among beneficiaries of rent stabilized properties in Los Angeles, by looking at the income distribution of those who live in properties built just before rent stabilization and just after. We can't exactly nail it, because rent stabilization in LA went into effect into effect in October 1978, and the census tells us the decade in when properties were being built. Still, comparing the incomes of renters living in buildings built in the 1970s with those of the 1980s can tell us something about how well targeted rent stabilization is.

I downloaded American Community Survey data from IPUMS USA. (See Steven Ruggles, Katie Genadek, Ronald Goeken, Josiah Grover, and Matthew Sobek. Integrated Public Use Microdata Series: Version 7.0 [dataset]. Minneapolis, MN: University of Minnesota, 2017. https://doi.org/10.18128/D010.V7.0). I looked at the city of Los Angeles, and stripped out single family detached houses, and, of course, owner houses. I used the ACS Household Weights. Here are the income distributions I found for properties built in the 1970s and 1980s.

Note that the median income of those in (largely) rent stabilized units is higher than those in units that are not stabilized. Also note that the incomes at the 75th percentile are nearly the same. At the 90th percentile, people in 1970s vintage properties have a lower income than those in 1980s properties, but their income is still rather high (i.e., it is a reasonable question to ask whether households who make $114,000 a year or more should be receiving a housing subsidy).

Taxing people of means (which we can identify) to provide housing subsidies to those without is good policy. It is the correct way to help those whose income is insufficient to pay for adequate housing.

(p.s., whenever I post something like this, I welcome any and all attempts to reproduce it. I makes mistakes!).